Decoding the US Crude Oil Inventory: How Does It Impact Oil Prices?
Crude oil price movement
May WTI (West Texas Intermediate) crude oil futures contracts rose slightly by 0.1% and settled at $38.32 per barrel on Wednesday, March 30, 2016. Brent crude oil futures rose slightly by 0.3% to $39.26 per barrel. Oil prices rose marginally due to a less-than-expected rise in US crude inventories. Oil tracking ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) fell by 0.7% and 1.5%, respectively, on the same day. The SPDR S&P 500 ETF (SPY) also rose by 0.4% and closed at $206.1 on March 30, 2016.
US Dollar Index
The US Dollar Index tested 12-day lows of 94.58 on Wednesday, March 30, 2016, after dovish comments from Fed Chair Janet Yellen. The US Dollar Index depreciated by 0.38%. It was trading at 94.80 on the same day. Yellen stressed that the US should be cautious about raising the interest rate in 2016. The US dollar is inversely correlated with crude oil prices. This makes crude oil affordable for crude oil importing countries. As a result, crude oil prices rose marginally in yesterday’s trade.
The uptick in crude oil prices benefits oil producers like SM Energy (SM), Sanchez Energy (SN), Denbury Resources (DNR), and Cobalt International Energy (CIE).
Crude oil price volatility
WTI and Brent crude oil prices have rallied more than 45% in the last two months. Crude oil prices hit 2016 highs on March 22, 2016. To learn more, read What Are the Key Bullish Drivers of Crude Oil Prices in 2016? and India and China: Bullish Catalysts for the Global Crude Oil Market.
However, US crude oil prices lost 7.6% since the 2016 high on March 22, 2016. Oil prices fell due to rising doubts about the oil producers’ meeting. Read What Are the Bearish Crude Oil Drivers for Crude Oil Prices? to learn more.
The roller coaster ride in crude oil and gas prices impacts ETFs like the United States Brent Oil (BNO), the United States 12 Month Oil (USL), the ProShares Ultra Oil & Gas (DIG), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).
The US crude oil inventory rose for the seventh consecutive day. Learn more about how it impacts crude oil prices in the next part of the series. The series also covers US crude oil production as well as import and refinery demand. The last four parts of the series focus on gasoline and distillate prices and inventories.
Browse this series on Market Realist: